Financial Fitness & Life Planning

The market experienced heavy losses in October. Last month I listed numerous risks that were latent at the time. This month they came together suddenly, led by international trade issues and rising interest rates. Even the beginning of a strong third quarter earnings season could not arrest the declines, as investors instead focused on the slowdown in earnings growth that lies ahead. With valuations lower, interest rates still conducive for good equity returns, and some of the froth now eliminated, my outlook has shifted back to mixed. I remain concerned, however, with the above risks along with still-high valuations, Fed tightening, and deteriorated corporate balance sheets outside of the financial sector.

This month I boosted my fund’s positions in Apple and Wells Fargo. I brought Apple back up to a full-sized position, buying the shares below where I had sold them the previous month. I concluded that I had been overly conservative in my valuation because of the outstanding quality of the business. I consider Wells Fargo to be the most attractive stock in an entire industry that is undervalued and sound. The guiding principle of my investment strategy is to follow Warren Buffett’s advice to “be fearful when others are greedy and greedy when others are fearful.” Thus, it was a month to buy.

~~Michael Berlin can be contacted at mberlin@mhbpartners.com and at (631) 629-4928 .

The information included in this article is not intended to be used as a basis for making investment decisions nor should it be constructed as a recommendation to buy or sell any specific security. Consult your investment professional for additional information and guidance.

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